Q Highlights Fundamental Research Corp. Siddharth Rajeev, B.Tech, MBA

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1 Siddharth Rajeev, B.Tech, MBA Analyst July 21, 2008 Investment Analysis for Intelligent Investors Skinvisible, Inc. (OTC BB: SKVI) Licensed three key acne products Sector/Industry: Healthcare/Biotech/Pharma Market Data (as of July 21, 2008) Current Price US$0.12 Fair Value US$0.75 ( ) Rating* BUY Risk* 4 (Speculative) 52 Week Range US$0.08 US$0.30 Shares O/S 78,624,238 Market Cap US$9.43 mm Current Yield N/A P/E (forward) N/A P/B N/A YoY Return -55.6% YoY OTCBB N/A *see back of report for rating and risk definitions 6,000,000 $0.35 5,000,000 $0.30 $0.25 4,000,000 $0.20 3,000,000 $0.15 2,000,000 $0.10 1,000,000 $ $ Jul Nov Mar Jul-08 Q Highlights Skinvisible has made good progress so far in 2008 by licensing out all three of its acne formulations. In January 2008, the company signed an agreement with Panalab Internacional S.A. for their anti-acne product formulated with Adapalene (licensed territories - Argentina, Brazil and Chile), and in May 2008, the company signed an agreement with Embil Pharmaceutical Co. Ltd. for products formulated with the active ingredients Clindamycine HCL and Retinoic Acid (licensed territories six countries in Eastern Europe and three in South East Asia). If everything goes according to plan, Skinvisible expects their partners, Embil and Panalab, to start selling their products in their respective territories in the next months. This implies that Skinvisible could potentially start receiving royalty payments (at no cost), and revenues from polymer sales in FY2010. Skinvisible has 25 different active ingredients targeting nine different applications; 20 of them are currently available to be licensed. They have received good interest in all their three acne products outside of the territories already signed. In addition, management is currently in discussions with several industry players to license their other products. Our models indicate that the company will have to raise close to $1 million in FY2008 to fund its operations and working capital. However, this estimate will change if the company signs an agreement with significant upfront licensing fees in We lowered our fair value estimate from $1.00 per share to $0.75 per share primarily due to share dilution. Key Financial Data (FYE - December 31) (U$) E 2009E Revenue 850, , ,685 1,166,225 1,818,361 Net Income (1,031,151) (2,097,604) (1,606,922) (1,079,622) (644,046) EPS (0.02) (0.03) (0.02) (0.01) (0.01) Cash 30,729 50,070 63,168 9,048 2,452 Working Capital (941,096) (1,043,664) (644,277) (205,858) 31,635 Total Assets 1,271, , , , ,419 Total Debt - 25, ,251 80,911 80,911 Skinvisible, Inc. is a research and development company that has formulated and patented innovative polymer delivery technology and compositions for topical skin applications. Its primary objective and focus is to license its patented polymer delivery technology (Invisicare ) and sell its trademarked polymer delivery vehicles and formulated products to established dermatological, medical, cosmetic, cosmeceutical and skincare brand manufacturers.

2 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 2 Licensed out two more acne formulations In May 2008, Skinvisible announced that it signed an agreement with Embil Pharmaceutical Co. Ltd. (a multi-national dermatology company headquartered in Turkey, with subsidiaries and partners in South East Asia), whereby Embil will have the right to manufacture, distribute, market, and sell two of Skinvisible's prescription anti-acne products formulated with the active ingredients Clindamycine HCL and Retinoic Acid. The licensed territories include six countries in Eastern Europe, including Turkey, Azerbaijan, Kazakhstan, Kyrgyzstan, Turkmenistan, and Uzbekistan, and three countries in South East Asia including, Indonesia, Malaysia and the Philippines. Embil will be responsible for seeking marketing approvals in all these countries. This agreement is Skinvisible's second entry into the $2.8 billion acne market. The company had licensed out their first anti-acne product, formulated with Adapalene and Invisicare, to Panalab Internacional S.A. in January 2008 (licensed territories - Argentina, Brazil and Chile). According to Skinvisible, they have received good interest in all their three acne products outside of the territories already signed, which is highly encouraging. Skinvisible will receive a development fee, a license fee allocated in milestone payments, and royalties based on product sales from Embil. Further details regarding the agreement were not disclosed so as not to influence other potential negotiations. If everything goes according to plan, Skinvisible expects their partners, Embil and Panalab, to start selling their products in their respective territories in the next months. This implies that Skinvisible could start receiving royalty payments (at no cost), and revenues from polymer sales in FY2010. Recent deal in the acne market: In June 2008, QLT Inc. (NASDAQ: QLTI) announced that they have entered into an agreement with Allergan, Inc. (NYSE: AGN) to fully divest QLT's worldwide rights to Aczone(R), an aqueous topical gel containing 5% dapsone, a prescription topical medicine approved in the U.S. and Canada for the treatment of acne vulgaris, for $150 million. Allergan is expecting peak sales of $75 million from Aczone. The acquisition, which was completed in July 2008, reflected a Price to Sales (P/S) of active ingredients targeting 9 applications Category Active Ingredients Rx/OTC/Cosmetic Availability Patent Status 1 Acne 1 3 Rx 3 Pending 2 Analgesics 2 OTC 2 Pending 3 Anti-aging 1 Cosmetic 1 Pending 4 Anti-fungal 3 Rx/OTC 3 Pending 5 Anti-inflammatory 4 Rx/OTC 3 Pending 6 Antimicrobial Hand Sanitizing Lotion 2,3 3 OTC 2 Approved for two 7 Other Skin/Hair 4 Cosmetic 3 Pending 8 Moisturizers 3 Rx/OTC/Cosmetic 3 Pending 9 UVA/UVB Sunscreen 2 OTC - Pending Total Licensed out two active ingredients to Embil (six countries in eastern Europe and three countries in S.E.Asia) Licensed out one active ingredient to Panalab (three countries in S.America) 2. One of the active ingredients is chlorhexidine, which is awaiting NDA and patent approvals. 3. Two of the three active ingredients are already licensed in North America Skinvisible has 25 different active ingredients targeting nine different applications; 20 of them are currently available to be licensed (see table above).

3 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 3 The company has made good progress so far in 2008 by licensing out all three of its acne formulations. In addition, management is currently in discussions with several industry players to license their other products. It is very important for investors to note that this can be a very time consuming process. However, we believe that Invisicare, because of its advantages over other delivery platforms, has the potential to generate significant interest in the industry as Skinvisible gets more exposure, and as more products are licensed out. An additional feature of Invisicare that Skinvisible has started to highlight recently is its extended/controlled release capability - a quality that can significantly boost drug delivery performance. Although the company has not disclosed any specifics relating to the controlled release capability of Invisicare with respect to other drug delivery platforms, we believe this feature adds to Invisicare scompetitive advantage. Patent Granted in Australia Skinvisible announced in June 2008 that they have been granted a comprehensive patent in Australia. Australia is the second country (after India) that has granted a comprehensive patent for Skinvisible s Invisicare technology, which includes protection in the areas of "Topical Composition, Topical Composition Precursor, and Methods for Manufacturing and Using". Although the company is not actively focusing in Australia at this moment, we believe it is a positive development, as this patent will make it easier for Skinvisible to license out their products in Australia going forward. With regard to its patent application in the U.S., the application was split into three parts, and the company has received one approval and is pending on the other two. Management Additions In June 2008, Skinvisible appointed Doreen McMorran as their Vice President of Business Development & Marketing. This allows the company to spend 100% of their time on licensing their technology. A brief biography of Ms. McMorran as provided by the company follows: Ms. McMorran brings to the company almost 20 years of experience in the medical and pharmaceutical industry, specifically in the areas of strategic planning, sales and marketing. She has spent the last six years selling to international dermatology and skincare focused companies like Procter and Gamble, Johnson & Johnson, Stiefel, Galderma, Novartis and Graceway, to name a few, providing medical education for physicians and consumers about dermatology conditions, products and treatments. Ms. McMorran, who holds a Bachelor of Commerce (Honors) degree, spent six years in the pharmaceutical industry with Astra Pharma. Additionally she has held senior management level positions with a number of healthcare companies, focusing on business development, sales, marketing and operations. Ms. McMorran will focus on driving business growth through new licensee acquisition for Skinvisible's formulated products and technology. She will contribute to the on-going strategic direction of the company and will be charged with identifying and growing the company's business opportunities.

4 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 4 Review of Financials Revenues and Gross Margins - Q revenues dropped by 19% YOY, from $0.18 million to $0.15 million. Most of the revenues came through the recognition of unearned licensing revenues recorded in previous years. Revenues dropped YOY due to decreased polymer sales to licensees. The company continues to receive royalties and revenues from polymer sales from its existing three licensees. The company continued to report high gross margins as most of the reported revenues came through the recognition of unearned licensing revenues, which have zero COGS. Gross margins in Q were 93.2% (versus 94.5% in Q1-2007). The chart below shows our revised revenue forecasts for FY2008 and FY2009. Although the company has made good progress in 2008 by licensing out their acne formulations, we have lowered our licensing revenue forecasts. We have maintained all other assumptions pertaining to our revenue forecasts. Revenue Projections (in $ mm) , E 2009E Polymer Sales Licensing, Royalties and Product Development Total Polymer Sales Licensing, Royalties and Product Development Total Our revised revenue forecasts for FY2008, and FY2009, are $1.17 million (down from $1.80 million) and $1.82 million ($2.41 million), respectively. Selling, General and Administrative expenses (SG&A) in the quarter increased YOY from $0.37 million (201% of sales) to $0.40 million (265% of sales). EBITDA margins dropped significantly due to a significant increase in non-cash stock-based compensation (which increased YOY from $0.05 million to $0.25 million) and interest expenses (from $0.02 mm to $0.16 million most of which were non-cash expenses). The table below shows margin comparisons.

5 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 5 M a r g in s Q Q G ro s s % % E B IT D A % % E B IT % % E B T % % N e t % % The company posted ($0.51 million) in EBITDA in Q1-2008, versus ($0.25 million) in Q The net loss in Q was $0.67 million (EPS: -$0.01) versus $0.27 million (EPS: - $0.00) in Q Revised EPS Forecasts: Lower revenue forecasts led to lower EPS forecasts. Our revised EPS forecasts for FY2008, and FY2009, are net losses of $1.08 million (EPS: -$0.01) and $0.64 million (EPS: -$0.01), respectively, down from $0.58 million (EPS: -$0.01) and $0.32 million (EPS: -$0.00). Cash flows The company spent $0.15 million on operations ($0.17 million in Q1-2007) and nil in capital expenditures in Q ($4,662 in Q1-2007). All expenditures were funded by cash on hand ($0.06 million at the end of FY2007) and net cash from financing activities ($0.09 million). Our models indicate that the company will have to raise close to $1 million in FY2008, to fund its operations and working capital. However, this estimate will change if the company signs an agreement with significant upfront licensing fees in Cash position As cash on hand was used to fund operations, Skinvisible s cash position dropped from $63,168 at the end of FY2007, to $5,785 at the end of Q SKVI s working capital deficit, however, dropped from $0.64 million at the end of FY2007, to $0.61 million at the end of Q1-2008, primarily due to a drop in unearned revenues (by $0.10 million) and loan from related parties and others (by $0.05 million). The company has no long-term debt. The table below shows a summary of the company s cash and liquidity position. 2004A 2005A 2006A 2007A Q1 Working Capital (in C$) (721,254) (941,096) (1,043,664) (644,277) (608,496) Current Ratio Debt / Capital 0.0% 0.0% -10.9% -64.7% -32.7% Debt / Equity 0.0% 0.0% -9.8% -39.3% -24.6% Interest Coverage Ratio (EBIT) * * Has yet to report positive EBIT Stock Options and Warrants At the end of Q1-2008, the company had 6.02 million stock options (weighted average exercise price of $0.17) and 4.86 million warrants (weighted average exercise price of $0.16) outstanding.

6 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 6 Valuation and Rating Our revised Discounted Cash Flow (DCF) valuation on the company dropped from $65.20 million, to $63.11 million, as we lowered our revenue forecasts. However, our value per share estimate dropped from $1.00 per share to $0.73 per share due to a significant increase in the number of diluted shares from million to million. The revised estimate also accounts for the potential share dilution due to a $1 million financing that we estimate the company will have to pursue in FY2008 to fund its operations and working capital. This estimate, we reiterate, will change if the company signs an agreement with significant upfront licensing fees in DCF Valuation Model (in US$) 2008F 2009F 2010F 2011F 2012F 2013F 2014F 2015F Terminal FFO (322,280) (262,506) 2,168,804 6,283,382 9,444,411 8,961,664 10,496,351 12,913,404 14,406,891 -increase in w/c (509,258) (244,089) (657,137) (510,765) (354,425) (389,976) (277,035) (466,989) (338,957) =CFO (831,538) (506,596) 1,511,667 5,772,617 9,089,987 8,571,688 10,219,316 12,446,415 14,067,934 -capex (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) FCF (856,538) (531,596) 1,486,667 5,747,617 9,064,987 8,546,688 10,194,316 12,421,415 14,042,934 PV (799,244) (431,896) 1,051,663 3,540,104 4,861,392 3,990,769 4,144,594 4,397,038 41,946,140 Discount Rate 14.9% Terminal Growth 3.00% Weighted Average Cost of Capital (WACC) Sum PV $62,700,560 Cost of Equity 15.8% Cash $1,005,785 Cost of Debt 10.0% Debt $95,160 Debt / Capital (long-term avg) 10.0% PV Equity $63,611,185 Equity / Capital (long-term avg) 90.0% Shares O/S 86,957,571 Tax 36.0% Value per share $0.73 WACC 14.9% Risks Based on our revised valuation and review of Q1 results, we reiterate our BUY rating, but have lowered our fair value estimate from $1.00 per share to $0.75 per share. The following factors, though not exhaustive, will cause our estimates to differ from actual results: Market recognition and brand awareness are key factors that will impact long-term growth prospects. Ongoing success depends on achieving innovative polymer delivery results, licensing agreement negotiations, royalty revenues, various patents pending, as well as their legalities, and conformance to any regulatory and environmental requirements. Our revenues and EPS projections depend heavily on the company s ability to license their products. A delay in approvals of the pending patents will put downward pressure on our revenue forecasts. We rate the company s shares Risk 4 (Speculative).

7 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 7 CONSOLIDATED STATEMENT OF OPERATIONS Year ended December 31 (expressed in US$) 2004A 2005A 2006A 2007A 2008F 2009F Revenues 519, , , ,685 1,166,225 1,818,361 Cost of revenues 96, ,399 77, , , ,271 Gross profit 423, , , ,810 1,035,491 1,681,090 Stock-based compensation 32, , , , , ,672 SG & A 1,084,674 1,225,626 1,830,493 1,508,773 1,619,664 1,943,597 EBITDA (693,633) (757,548) (2,075,666) (1,346,969) (1,059,179) (626,179) Amortization and Depreciation 111, ,710 21,187 18,176 14,693 17,867 EBIT (804,972) (1,033,258) (2,096,853) (1,365,145) (1,073,872) (644,046) Other income (expense) 2, Interest Income (expense) (943) (241,777) (5,750) EBT (804,972) (1,031,151) (2,097,604) (1,606,922) (1,079,622) (644,046) Taxes Foreign currency translation adjustment - Net Income (804,972) (1,031,151) (2,097,604) (1,606,922) (1,079,622) (644,046) EPS (0.01) (0.02) (0.03) (0.02) (0.01) (0.01)

8 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 8 CONSOLIDATED BALANCE SHEET As at December 31 (expressed in US$) 2004A 2005A 2006A 2007A 2008F 2009F ASSETS Current Cash 92,434 30,729 50,070 63,168 9,048 2,452 Accounts receivables 19, ,989 28,812 42,088 85, ,843 Inventory 112,642 73,794 22,902 20,455 58,311 90,918 Due from related party 21,126 4,765 1,119 1,196 1,196 1,196 Prepaid expenses & others 1,921 6,344 3, , , ,257 Total current assets 248, , , , , ,666 Fixed Assets 47,894 26,480 29,652 22,440 44,074 62,463 Deposits Patents and trademarks 61,613 51,394 41,175 34,873 23,546 12,290 License and distributor rights 50,000 50,000 50,000 50,000 50,000 50,000 Prepaid royalty fees 1,140, , , , , ,000 Total Assets 1,547,570 1,271, , , , ,419 LIABILITIES AND SHAREHOLDERS EQUITY Current Bank overdraft Accounts payable and accrued liabilities 346, , , , , ,514 Accrued interest payable 6,948 13,606 13,606 Loan from related party and others 25,728 78,860 26,468 26,468 Convertible notes payables 54,443 54,443 54,443 Unearned revenues 623, , , ,000 41,500 Total current liabilities 969,317 1,184,717 1,150,028 1,069, , ,031 Long-term liabilities Total liabilities 969,317 1,184,717 1,150,028 1,069, , ,031 Shareholders equity (deficiency) Equity 11,139,424 11,544,227 13,427,761 14,939,884 15,933,226 16,458,226 Stock subscription payable 134,873 Accumulatd other comprehensive income (672) 475, ,678 Accumulated Profit (Deficit) (10,561,171) (11,592,322) (13,689,926) (15,296,848) (16,376,470) (17,020,516) Total shareholders equity (deficiency) 578,253 86,778 (262,837) (356,964) 31, ,388 Total Liabilities and Shareholder's equity 1,547,570 1,271, , , , ,419

9 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 9 CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31 (expressed in US$, 000's) 2004A 2005A 2006A 2007A 2008F 2009F OPERATING ACTIVITIES Net income (loss) (804,972) (1,031,151) (2,097,604) (1,606,922) (1,079,622) (644,046) Add (deduct) non-cash items Depreciation and amortization 111, ,710 21,187 18,176 14,693 17,867 Stock based compensation 32, , , , , ,672 Stock issued for donation Others Interest expense ,056 Funds from Operations (661,483) (513,638) (1,216,314) (891,684) (589,923) (262,506) Changes in working capital Inventory (35,954) 38,848 50,892 2,447 (37,856) (32,607) Accounts receivables 8,237 (108,048) 99,177 (37,207) (43,112) (47,643) Prepaid expenses and others (1,921) (4,423) 2,883 13, ,422 (9,058) Related party receivables (21,126) 16,361 - (77) - - Deposits 240, ,000 Bank draft Accounts payables and liabilities (371,998) 11, , , (113,281) Accrued interest - 11,398 Unearned revenues 623, ,000 (153,000) (400,000) (408,500) (41,500) 200, , , ,812 (386,805) (244,089) Cash flow from operations (461,245) (204,501) (863,040) (743,872) (976,728) (506,596) FINANCING ACTIVITIES Proceeds from related party loans and others 25, ,132 (52,392) Proceeds from convertible notes payables - 410,500 Proceeds from stock subscription payables 134, Proceeds from issuance of common stock 607,894 12, , ,000 1,000, ,000 Cash provided by financing activities 607, , , , , ,000 INVESTING ACTIVITIES Purchase of fixed assets and untangible assets (54,215) (4,077) (13,847) (4,662) (25,000) (25,000) Proceeds from disposal of fixed assets Cash used in investing activities (54,215) (4,077) (13,847) (4,662) (25,000) (25,000) Exchange rate changes Increase in cash and cash equivalents 92,434 (61,705) 19,341 13,098 (54,120) (6,596) Cash and cash equivalents, beginning of year - 92,434 30,729 50,070 63,168 9,048 Cash and cash equivalents, end of year 92,434 30,729 50,070 63,168 9,048 2,452

10 Skinvisible, Inc. (OTC BB: SKVI.OB) Update Page 10 Fundamental Research Corp. Equity Rating Scale: Fundamental Research Corp. Equity Rating Scale: Buy Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold Annual expected rate of return is between 5% and 12% Sell Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though curent free cash flow may be negative due to capital investment). The company s capital structure is conservative with litle to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative. Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any forward looking statements are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts wil materialize. Actual results wil likely vary. The analyst and Fundamental Research Corp. FRC does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees of less than $30,000 have been paid by SKVI to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. 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